Share Capital Reductions and Increases

Share Capital Reductions and Increases

• Reduction of share capital: A company's assets decrease at the same time as the share capital, either due to losses or other reasons.
• Nominal reduction (reduction for losses): No simultaneous decrease in the company's assets
• Material (or paid) share capital increase: Implies new financial resources (new contributions) and issuance of new shares. Previous contributions must be fully paid-up. There are no losses resulting in compulsory reduction.
• Delegated capital share increase: Bylaws permit the capital share to be increased multiple times.
• Max term for capital increase subscription: 5 years.
• Non-divisible increase: The increase in share capital cannot be partially subscribed.
• EU Directive 2017/1132, Article 68: Any increase in capital must be decided by the general meeting & registered in business register. Authorities may authorize an increase up to a maximum amount (determined by law).
• EU Directive 2017/1132, Article 69: Shares issued for consideration must be paid up to at least 25% of their nominal (or accountable par) value. A premium shall be paid in full.
• EU Directive 2017/1132, Article 70: Shares issued outside of cash consideration must be transferred in full with five years of the decision.
• Right of pre-emption (art. 2441 c.c.): Shareholders have precedence over third-party buyers in capital increases. This right is proportionate to the number of shares a shareholder owns. It has a set duration for exercising the right (15 days usually). Shareholders whose pre-emption rights aren't exercised get preferential rights on unadopted shares. The right of pre-emption can be excluded when shares are issued with a premium or by indirect pre-emption rights. Further, the right is recorded in the business register.
• Nominal (or free) share capital increase (art. 2442 c.c.): Utilizing company assets for increasing share capital with specific procedures.
• Material share capital reduction (art. 2445 c.c.): Outlined methods and reasons for reducing the capital. Includes creditors' opposition procedures, and recording in the company's register.
• EU Directive 2017/1132, Article 73: Any capital reduction, excluding court orders, requires a general meeting decision aligned with quorum/majority rules (without prejudice). The meeting notice must detail the reduction purpose and execution methods.

Additional Notes

• EU Directive 2017/1132, Article 72: A pre-emptive share offer to shareholders is required when increasing capital by cash consideration, based on the shareholder’s proportionate capital holdings. Publication in the national gazette is mandatory or registration if all shares are registered.
• EU Directive 2017/1132, Article 75: Safeguards for creditors during share capital reduction are mandated. Details the rights creditors have if the company's capital is reduced, detailing circumstances and conditions.
• EU Directive 2017/1132, Article 76: Member States may remove safeguards against certain types of capital reductions.
• EU Directive 2017/1132, Article 84: Derogation from certain requirements, allowing member states to exempt requirements in some circumstances. In certain situations, the right to participate in company capital may be excluded for the employees.
• Nominal Share Capital Reduction (due to losses): Optional reduction (less than 1/3), and mandatory reduction (more than 1/3) are explained, each with specific procedures.
• EU Directive 2017/1132, Article 77: The subscribed capital cannot be reduced to be less than minimum capital value unless increased to at least that minimum. Relevant examples of procedures are mentioned.